SPAIN

Photo by: raspberrybazaar

Kingdom of Spain

España

COUNTRY OVERVIEW

LOCATION AND SIZE.

Spain is located in southwestern Europe. It is bordered by the Atlantic
Ocean and the Bay of Biscay in the northwest and by the Mediterranean
Sea in the east and the south. It has a 1,214 kilometer (754 mile) land
border with Portugal in the west and a 623 kilometer (387 mile) border
with France and a 63.7 kilometer (39.5 mile) border with the tiny
city-state of Andorra in the northeast, characterized by the Pyrenean
Mountains. In the south it has a 1.2 kilometer (.75 mile) border with
Gibraltar (which legally belongs to the United Kingdom) and a 96
kilometer (59.6 mile) border with Morocco (Ceuta, Melilla). All together
Spain's 504,782 square kilometer (194,896 square mile) territory,
including the Balearic Islands in the Mediterranean, the Canary Islands
in the Atlantic, Ceuta, and Melilla, has 1,917.8 kilometers (1,191.7
miles) of land boundaries and 4,964 kilometers (3,084.6 miles) of
coastline. Spain is slightly bigger than twice the size of Oregon. Its
capital, Madrid (with 2,866,850 inhabitants), is situated on the Central
Plateau, and Barcelona (with 1,508,805 inhabitants), another major city,
is in the northeast by the Balearic Sea (Western Mediterranean). Madrid
and Barcelona are the only Spanish cities with a population over a
million.

POPULATION.

The population of Spain was 39,996,671 in July 2000. This compares to
37.7 million in 1981 and 38.7 million in 1984. Population growth was
encouraged by the totalitarian regime of General Francisco Franco
(1939-1975) through different state-sponsored programs that financially
rewarded families with more than 5 children. Moreover, Spain experienced
an urban boom in the 1960s and as a consequence over half the population
lived in towns of at least 50,000 inhabitants by 1970. This boom was
primarily a consequence of the "economic miracle" of the
late 1950s and early 1960s spurred on by the stabilization plans led by
the International Monetary Fund (IMF) and the Organization for Economic
Co-operation and Development (OECD). There was rapid industrialization,
agriculture was transformed, the industry and service sector came to
dominate, and subsequently, there were major migratory shifts from rural
to urban centers.

During the Spanish transition to democracy that followed Franco's
death in November 1975 and after the establishment of the Spanish
constitution in 1978, population growth decreased. The population growth
was a meager 0.11 percent in 2000. According to the last census (1998),
the population density is 201.3 per square kilometer (521.4 per square
mile). Similar to other western European nations, this lack of growth
can be attributed to

the increase in the cost of living, increasing housing prices, and the
incorporation of women into the workforce. The main growth centers today
are Madrid, Barcelona, Bilbao, Valencia, Sevilla, Zaragoza, Malaga, and
Murcia. This reflects the importance of the Spanish
"sub-cultures," in particular the importance of the
Catalans and the Basques. Despite the fact that church attendance has
been progressively waning, the population of Spain is predominantly
Roman Catholic.

The projected population for 2010 is 39,917,000. Like other Western
European nations Spain will have to face the challenge of a decrease in
the proportion of active population due to the aging of the nation.
Moreover, it remains to be seen how tighter
immigration
laws can be reconciled with the fact that the projections show that
without the influx of foreign immigrants, the population of Spain will
in fact decline much more significantly. This immigrant population,
which has increasingly entered Spain since the mid-1980s, is
concentrated from Northern Africa (Morocco) and South America (Colombia,
El Salvador, and Argentina).

LIVESTOCK, DAIRY, AND POULTRY.

This sector has traditionally been financially the most important
sector, accounting for 39 percent of overall agricultural output in
1999. However, the sector has suffered from increased competition from
other EU countries, and the "Agenda2000" will gradually
cut the beef support prices by 20 percent. Although economists predicted
that livestock production would increase slightly in 2000 with improved
pasture conditions and more rain, outbreaks of "mad cow
disease" prevented such increase. BSE (bovine spongiform
encephalopathy), which is also referred to as "mad cow
disease," is a highly contagious, lethal disease of the central
nervous system in cattle. There have been several cases, particularly in
Britain in the 1990s, of people who have died after eating meat from
cows infected with BSE. In Spain, the first cases of mad cow disease
were detected in September 2000 in Galicia, with subsequent cases
arising in other provinces in Spain. The cases in Spain can be traced
back to Britain; the same feed that was given to cows that developed BSE
in the UK was transported and used in other western European farms.
Although there have been no human fatalities reported in Spain as a
result of the contamination, consumer confidence in beef plummeted. By
February 2001, consumption of beef had fallen by an estimated 80
percent. More consumers turned to other meats, including fish, pork,
poultry, and lamb, in spite of the subsequent rise in prices. The price
of beef, in the meantime, continues to slide, which leaves the future of
Spain's beef industry in doubt.

HORTICULTURAL CROPS.

This sector—which includes citrus, deciduous fruit, olives and
olive oil, nuts, wine, and vegetables—is gaining importance to
the point that its value of production now equals that of livestock,
dairy, and poultry at 39 percent. This sector has greatly benefitted
from access to EU markets and accounts for 70 percent of overall
agricultural exports. Both Spanish olive oil and wine production were
initially subject to the tough restrictions imposed by the Common
Agriculture Policy during the 1990s. However, recent policy changes have
allowed for Spain's quota for olive oil production to reflect the
actual production capacity. Spain's vineyards have also
benefitted from policy changes; previous programs which uprooted
vineyards are now replaced with new programs that concentrate on
restructuring vineyards to make the Spanish wine industry more
competitive. Spain produces some of the best red wines in world, with
the most famous being those from the Rioja region. More than 30 percent
of such wines are destined to the EU, North American, and Latin American
markets. Other regions producing fine wines include Catalonia, Ribera
del Duero, Navarra, and La Mancha. These wines are generally made from
the Tempranillo variety of grapes and offer a distinct taste to those
from France, for example, which use the Merlot variety.

FIELD CROPS.

This sector includes grain, tobacco, cotton, forage, sugar beets, and
oil seeds. It covers a larger area than the horticultural crops, but
accounted for only 15 percent of the total value of production in 1999.
The most important sector of field crops is cereals, especially wheat
and barley. However, Spanish cereal production has suffered from
competition from the EU, and, under the "Agenda2000,"
support prices for all grains will be reduced by 15 percent. The most
plentifully produced field crop is alfalfa, used for animal fodder. The
"Agenda2000"
will also reduce area payments for oilseeds to the same level with
grains, which is expected to reduce the production of the sunflower seed
crop significantly.

FISHING.

Even though the total catch declined in the 1980s, the fishing industry
is still important in Spain. The main fishing ports are Vigo and La
Coruna in the Northwest. Despite Spain's vast fishing waters,
Spanish fishermen have several times been arrested for fishing illegally
in Canadian and Moroccan waters. The most visible conflict of late has
been the so-called "Turbot War" with Canada in 1995 when
Canadian authorities fired on Spanish fisherman for trespassing in
Canadian waters. Legal experts argue that the Canadian government
clearly violated international law by firing upon a vessel which was, in
fact, in international waters. Although there was a peaceful resolution
to the conflict, the incident highlights concerns voiced by other
countries in the past, such as Ireland and Morocco, about Spanish
fishermen.

INDUSTRY

Ever since liberalization became a goal in the late 1950s, Spanish
industry has been growing and becoming more diversified. This is
particularly the case in mining, manufacturing, and metalworking. As a
result, companies have grown bigger, and foreign investment has become
more significant.

MINING.

Spain has one of Europe's most important and diversified mining
sectors. Over half the production is coal, while other major products
are iron, pyrites, copper, lead, zinc, tungsten, uranium, mercury,
potash, and chloride. Despite its strength, Spanish mining is not
sufficient to satisfy domestic demand and, therefore, Spain continues to
be a large-scale importer of minerals. Due to competition from other EU
countries, the Spanish mining industry has been subject to restructuring
and closures, especially in the Asturian coal industry, which has led to
miners' protests. The mining sector remains stagnant but is
expected to recover when Spain increases its gold production.

METALWORKING.

The iron, steel, and shipbuilding of Asturias and the Basque Country
experienced downsizing in the 1980s. However, the sector has been
recovering strongly since 1996, thanks to increased production in
shipbuilding, data-processing equipment, and transportation equipment.

MANUFACTURING.

In the automobile industry, Spain's top exporters—Opel,
SEAT, Volkswagen, Citroen, and Renault—set records in 1996 and
1999. The fact that all car producers in Spain are foreign
multinationals is reflective of their strength in the economy. The
German car company Volkswagen, for example, actually received large
amounts of
subsidies
from the Spanish governments of the 1980s and 1990s to take over the
(then) only native Spanish car manufacturer, SEAT.

In other manufacturing activities, however, foreign multinationals play
less of a role. For example, the cotton, woollen textiles, and clothing
industries have maintained their importance in the economy.
Predominantly located in the Catalan area since the 19th century, they
are characterized as being small- and medium-sized enterprises that are
family-owned. Spain also manufactures toys, shoes, electrical appliances
(televisions, refrigerators, and washing machines), and foodstuffs. Toys
and shoes, in particular, have a reputation for high quality and
constitute a main export for the manufacturing sector.

SERVICES

TOURISM.

Spain overtook the United States recently as the world's second
most important tourist resort. The tourist industry employs 12.5 percent
of the Spanish
workforce
and accounts for 10 percent of GDP, with a 9 percent annual growth
rate. The success of the industry stems from a variety of factors. It
generally costs less to travel and vacation in Spain compared to many
places in the world. Spain's already high-quality resorts are
improving as aging accommodations are restored. The warm weather is
another draw for tourists, especially in southern Spain. The main
tourist areas are Mallorca, the Canary Islands, and the Costa Brava. The
total number of tourists in 1999 was 58,588,944, and the total number of
available accommodations in the country was 1,282,013. This booming
industry's role in the Spanish economy does have a downside,
however; some analysts worry that the seasonal nature of the tourist
industry may add to the precariousness of the Spanish labor market.

FINANCIAL SERVICES.

The largest Spanish bank is the BBVA (Banco Bilbao Vizcaya Argentaria),
and the second largest is the BSCH (Banco Santander Central Hispano),
both the fruit of mergers in 1999. BBVA is the product of the merger of
the Banco de Bilbao (founded in 1857), Banco de Vizcaya (1901), and
Argentaria (1983); the BSCH comes from the merger of Banco de Santander
(1857), Banco Hispano-Americano (1900), and Banco Central (1919). Other
important banks in Spain include Banco Urquijo, the Grupo March, la
Caixa, and Caja de Madrid. The concentration of native Spanish banks in
the sector stems from the
Ley de Ordenación Bancaria
of 1921 that disallowed foreign banks from operating in Spain for
several years. Although foreign banks were allowed to enter into Spain
in the early 1960s, the stronghold obtained by main Spanish players
effectively prevented outside competition. In fact, when many of the
foreign banks entered the Spanish market in the late 1960s and early
1970s—such as Deutsche Bank, Barclays, and Manufacturer's
Hanover Trust—they did so only with the
cooperation of big Spanish financial players such as Banco Bilbao,
Vizcaya, and Santander. Cooperation included the sharing of staff with
members of Spanish financial institutions—especially important
given the fact that many foreigners cannot speak Spanish. Despite
liberalization of the financial sector, Spanish financial capital
maintained its dominance.

Today, Spain's financial services are diversified and fully
integrated in the international financial markets. The EU single market
in banking and insurance services has intensified competition, brought
down interest rates, and encouraged mergers. Spanish banks are well
capitalized. Beyond the main players mentioned above (BBVA, BSCH), there
are 103 domestic private banks—mostly headquartered in
Madrid—and 53 foreign ones—34 of which are headquartered
in the EU. There are also 50 confederated savings banks and 12 regional
savings bank federations that are, in principle, non-profit making. They
concentrate on private savings and loans and financing public and
private projects. To this day, Spanish investment and brokerage entities
have increased in number and in the volume of their investments. The
credit market is structured around private banks.

TELECOMMUNICATIONS.

The sector is registering spectacular increases. The main operator of
telecommunications is Telefónica, but, given recent liberalization
initiatives, other operators such as Airtel and Amena have gained
significant market strength in a short period of time. The mobile
telephone market increased from 14 million to 19 million users during
the first half of 1999. Growth is also expected in the cable television
sector, even though only 10 percent of the population subscribes to
these services. Although the number of PCs per household is low in Spain
compared to other industrialized states, it is projected that falling PC
prices and cuts to prices on local calls will allow for PC consumption
to triple within 5 years.

AVIATION.

The EU liberalized the aviation sector due to increased demand for air
transport services. As a result, many new local airlines are in
competition with the main national airline, Iberia. Two major new
competitors, Spanair and Air Europa, have daily flights between major
cities in Spain as well as the rest of Continental Europe and the United
Kingdom.

DEPENDENCIES

Spain has no territories or colonies.

BIBLIOGRAPHY

Chari, R. "The March 2000 Spanish Election: A 'Critical
Election'?"
West European Politics,
Vol. 23, No. 3, July 2000.

Heywood, P.
The Government and Politics of Spain. Comparative Government and
Politics Series
, edited by V. Wright. Oxford: Oxford University Press, 1995.

CAPITAL:

Madrid.

MONETARY UNIT:

Peseta (Pta). There are coins of 1, 5, 10, 25, 50, 100, and 500 pesetas
and bills of 1,000, 2,000, 5,000, and 10,000 pesetas. Similar to other
Western European countries which comply with the European Union's
Economic and Monetary Union (EMU), the Spanish currency will no longer
circulate after January 2002 when it will be replaced by the euro, the
new unified currency of 12 European Union member states. The fixed
exchange rate is 1 euro will be worth 166.667 pesetas. Since January
2000, transactions on the Spanish stock market have already been done in
the new currency.